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Sanasa Development Bank PLC (SDB) recorded an outstanding performance for the financial year ending December 2014, with a 103% increase in its profitability for the year on top of a 450% increase in profits after tax in the last quarter, as against the corresponding period in 2013. With these growth rates, SDB recorded a profit after tax of Rs. 504 million during 2014.
Other performance indicators also reflected significant increases indicating a definite growth trend in the bank’s performance in the year ending 2014. The total interest income grew by 10% on YOY basis. When comparing with the corresponding period in 2013, a quarterly growth rate of 21% can be seen in the bank’s interest income.
In keeping abreast with the market interest rate fluctuations, SDB managed to control its borrowing rates effectively. This has led to a reduction in interest cost by 5% in 2014, which also led to a surge in the lending portfolio. The bank also earns fees and commission income from lending, card services and other support services provided to its clientele.
The bank’s net fee and commission income grew by 35% from Rs. 120 million in 2013 to Rs. 162 million in 2014. This growth was primarily due to the increase in the overall asset base of the bank, particularly exploiting opportunities for cross selling products and services. As a strategic move, the bank divested its equity investment in Peoples Leasing and Finance PLC in 2014. The one off capital gain earned on this has led to an increase in other operating income by 166% in 2014.
The impairment provision for loans and advances for the year ended 31 December 2014 was Rs. 204.389 million as against the Rs. 324.620 million provision made in 2013. The 58% significant decline in the impairment charge in last quarter of 2014 over the comparative period was primarily due to one-off provision made against pawning advances made during last quarter of 2013. Further, these improvements in 2014 over preceding year were driven by the aggressive recovery efforts of the bank.
The retail loan book has shown a significant improvement in portfolio quality whilst leasing book impairment has remained at levels reported in the previous years. The trend in impairment of pawning portfolio has also shown improvement during 2014 and it is expected to improve further in 2015 as well. The bank also succeeded in reducing its gross and net non-performing loan ratios to 3.76% and 1.73% respectively and maintaining ratios below the industry average of 4.20% in gross terms.
Total operating expenses recorded an increase of 20% over the previous year mainly on account of revision of personal cost and the new recruitments made in preparation for the expansion of branch network in 2015. All these new recruits have been deployed at branch level to provide them an in house training, which is much more needed before releasing them to the commercial environment.
SDB which started its business in 1997 reached out to customers at grass roots level beyond the Western Province setting up business in rural and remote areas with their services. The bank has now matured together with its customer base to a network of 82 branches and is preparing for the next level of banking which is expanding its services to gear itself to cater to the lower end of the SME sector as well. The bank’s total assets reached to landmark amount of Rs. 40.5 billion in December 2014, a 36% growth since 31 December 2013. Both lending portfolios and deposits bases grew; lending from Rs. 22 billion in 2013 to Rs. 32 billon by 2014. Similarly deposits grew from Rs. 23 billion in 2013 to Rs. 30 billion in 2014 reflecting a 28% increase in business over the previous year. The two new attractive loan products launched aiming government pensioners and ex-service personnel in second half of 2014, contributed immensely for the growth in loan portfolio.
As per special instructions given by the Central Bank, SDB is required to increase its core capital base to Rs. 5 billion by 1 January 2016. Accordingly, by relying on the shareholders, a Rights Issue was announced by SDB in 2014 which concluded in December, comfortably drawing applications for over and above the number of shares offered under the rights. Under this SDB issued 12,587,661 new ordinary voting shares in the ratio of one share for every two shares held by the existing ordinary voting shareholders at an issue price of Rs. 80 per share raising capital amounting to slightly over Rs. 1 billion.
Consequently, SDB’s outstanding ordinary voting shares increased to 37,762,983 shares. With this fresh capital infusion the total capital base of the bank reached to Rs. 4.6 billion mark by the end of 2014. With the growth plans in the pipeline, the management is confident of achieving the stipulated capital base of Rs. 5 billion by the end of 2015.
At the end of 2014, the bank’s Tier 1 core capital ratios were also at healthy levels with 14.89% whereas the minimum requirement is at 5%. The total capital adequacy ratio was 15.3% whereas the statutory requirement is 10%. The liquidity ratio of the bank stood at 21.61% at December 2014, which is well above the regulatory limit of 20%.
Other ratios also performed better than the last financial year. The Return on Assets ROA recorded 2.14% as compared to 1.2% in 2013. Return on Equity (ROE) was 12.01% as against 7.42% in the previous year.
At the 50th Annual Report Awards competition of the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), The Annual Report of the SDB for the year 2013 was awarded a certificate of compliance by the CA Sri Lanka for incorporating transparency and good governance.
Commenting on the success in 2014, SDB Chief Executive Officer Nimal C. Hapuarachchi added, “Over the years, we have been able to support a large number of individuals, households and communities across the country, to empower themselves from the grassroots level to a sustainable level of growth in the medium and long term through responsible financing. Now is the time to develop SME-oriented financial products to assist them to move to the next level in their enterprises and industries. That’s one of our main objectives this year,” Hapuarachchi said.
Speaking on the success, Sanasa Development Bank PLC Chairperson M.S. Kiriwandeniya stated, “The support received from our shareholders has been immense and I am pleased to see the faith showed by them in the rights issue at this crucial juncture in the bank’s progress. While we are gearing ourselves to step into the next level of service in the SME sector we are also constantly keeping our pulse on the needs of our core clientele and improvising products to suit their needs and demands,” the Chairperson said.
“In fact this key factor has been SDB’s core strength in the past and SDB will continue to service our existing customer base to the fullest while branching out into a wider network and service level,” she added. She thanked all the shareholders who participated in the Rights Issue amidst volatility in the capital markets, which enables SDB to drive the bank towards growth and stability in 2014.
